State settles with drug company for $37M

Virginia boosted its recovery from a company accused of Medicaid fraud by passing up a multi-state settlement and – instead – suing the firm in a California federal court, according to the state attorney general’s office.

Virginia refused to join a deal where 29 states split $151 million recovered from McKesson Corp., a San Francisco pharmaceutical wholesaler. Instead, Virginia recovered $37 million on its own, about ten times as much as it might have received under the multi-state deal, according to Attorney General Ken Cuccinelli.

State lawyers teamed with a California law firm and sued McKesson in San Francisco federal court. Trial was set for next month, Cuccinelli said.

“The original settlement did not cover our losses from the fraud,” Cuccinelli said at a press conference, explaining why the state balked at the multi-state settlement.

McKesson was accused of working to boost Average Wholesale Price information, causing the state Medicaid program to overpay for prescription drugs.

Of the $37 million recovery, $16.8 million is for compensatory damages, $13.5 million is for penalties, and about $6.7 covers fees and costs for the California lawyers.

State lawyers and paralegals pored over more than three million pages of documents in the discovery phase of the litigation, Cuccinelli said, praising the work of his staff.